Banking and Finance Law consists of state and Federal statutory laws pertaining to the regulation of banks and financial institutions. Bank accounts may be established by national and state chartered banks and savings associations. All banks and financial institutions are regulated by the law under which they were established.

Until the early 1980's interest rates on bank accounts were regulated and controlled by the national government. A ceiling existed on interest rates for savings accounts. Interest payments on demand deposit accounts were generally prohibited. Banks were also prohibited from offering money market accounts. The Depository Institutions Deregulation Act of 1980 (DIDRA) eliminated the interest rate controls on savings accounts. The restrictions on checking and money market accounts were lifted nationwide by the DIDRA (by the authorization of NOW and Super NOW checking accounts) and the Garn-St Germain Depository Institutions Act.

After the stock market crash in 1929, the federal government began to insure deposits. The Federal Deposit Insurance Corporation (FDIC) was created as a type of insurance that is maintained through premiums made by institutions that are members of the FDIC. People and businesses that bank at the FDIC member institutions are insured on deposits up to $100,000. Corporate finance law focuses on securities such as bonds, preferred stock, common stock and convertible securities.

The operation of checking accounts is governed by state law supplemented by some federal law. Article 4 of the Uniform Commercial Code, which has been adopted at least in part in every state, "defines rights between parties with respect to bank deposits and collections." Part 1 of the Article contains general provisions and definitions. Part 2 governs the actions of the first bank to accept the check (depository bank) and other banks that handle the check but are not responsible for its final payment (collecting banks). Part 3 governs the actions of the bank that is responsible for the payment of the check (payor bank). Part 4 governs the relationship between a payor bank and its customers. Part 5 governs documentary drafts. These are checks or other types of drafts that will only be honored if certain papers are first presented to the payor of the draft.

If a check passes through the federal reserve system (as most checks do) Regulation J of the Federal Reserve comes into effect. Regulation CC governs extensively the availability of funds in a depositor's account and the process involving checks dishonored due to non-payment. The Expedited Funds Availability Act limits the time that a depository bank can delay before making the amount of a deposited check available for withdrawal. The act is elaborated by Subpart B of regulation CC. Checks are negotiable instruments, which means that sections of Article 3 of the Uniform Commercial Code govern the relationship between parties who receive and transfer checks.

Should I hire a lawyer?

If you are federally insured financial institution or one of its officers or directors facing a supervisory bank examination by any of the Federal banking agencies, including the FDIC (Federal Deposit Insurance Corporation), OCC (Office of the Comptroller of the Currency), FRS or "Fed" (Federal Reserve System), OTS (Office of Thrift Supervision), and NCUA (National Credit Union Administration) you need to consult with a lawyer immediately. Even if you are not facing litigation or a regulatory enforcement proceeding, retaining an attorney to assure compliance with all state and federal banking laws, rules and regulations governing the operations of your institution will certainly help you avoid legal hassles later. Use the State Lawyers Directory to find a qualified banking and finance lawyer to assist you in your legal matters now.